Revised Business Strategy and Proposed Fundraise

RNS Number : 3417S

Ceres Power Holdings plc

29 November 2012

 



THIS ANNOUNCEMENT IS RESTRICTED AND IT IS NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION, IN WHOLE OR IN PART, DIRECTLY OR INDIRECTLY, IN OR INTO THE UNITED STATES, CANADA, JAPAN, THE REPUBLIC OF SOUTH AFRICA, AUSTRALIA OR NEW ZEALAND OR ANY OTHER STATE OR JURISDICTION IN WHICH SUCH RELEASE, PUBLICATION OR DISTRIBUTION WOULD BE UNLAWFUL

29 November 2012

Ceres Power Holdings plc

REVISED BUSINESS STRATEGY

PROPOSED FIRM PLACING AND PLACING AND OPEN OFFER

CAPITAL REORGANISATION

BOARD CHANGES

AND NOTICE OF GENERAL MEETING

Ceres Power Holdings plc ("Ceres" or the "Company"), a leading developer of clean, efficient, cost-effective fuel cell technology for use in distributed generation and other applications, today announces its intention to pursue an alternative strategy for the development of the Group's business together with a proposed equity issue to raise £3,300,000 (before expenses).

Definitions for all terms defined in this announcement are provided at the end of this announcement.

Highlights

·      The new business strategy is to focus on the development and commercialisation of Ceres' existing core fuel cell and fuel cell module ('FCM') technology platform

·      Under this alternative business model, Ceres would offer its technology (through components including cells, stacks and FCMs) together with technical support to a wide range of Original Equipment Manufacturers ('OEM') and Ceres would expect to earn revenues from a combination of development licenses, on-going fees for services and royalties on OEM mass market product sales

·      Proposed Firm Placing to raise £2,650,000 and Placing and Open Offer to raise £650,000 to raise a total of £3,300,000 (before expenses)

·      Issue price for the Firm Placing and Placing and Open Offer of 1 pence per New Ordinary Share

·      Open Offer Entitlement for Qualifying Shareholders of 49 Open Offer Shares for every 65 Existing Ordinary Shares

·      Appointment of Alan Aubrey as Non-Executive Chairman and Steve Callaghan, Michael Bretherton and Robert Trezona, as Non-Executive Directors with effect from, and conditional on, Admission  

Revised Business Strategy

Following the Company's announcement on 4 October 2012 that it had been unsuccessful in securing the required funding for its micro-Combined Heat and Power ('m-CHP') product business going forward, the Board announces its intention to pursue an alternative strategy for the business.  This alternative strategy will involve the restructuring of the business together with a capital raising of £3.30 million (before expenses). The capital raising is to be implemented by way of the Firm Placing and Placing and Open Offer to fund its planned expenditure, led principally by equity support from IP Group plc and ORA Capital Partners Limited.  The revised business strategy will see a resizing of the Group's activities and a focus on the continued development and commercialisation of Ceres' core fuel cell and fuel cell module ('FCM') technology platform, rather than developing and selling complete m-CHP products.

Under this alternative business model, Ceres will offer its technology (through components including cells, stacks and FCMs) to customers to be incorporated into their own products for multiple mass market applications, including m-CHP. Ceres would expect to earn revenues from a combination of development licenses, on-going fees for services and royalties on partners' mass market product sales. The core fuel cell and FCM technology is considered by the Board to be suitable for m-CHP in territories including Europe, South Korea, Japan and North America, and may also be used as the basis of products such as vehicle auxiliary power, telecoms base station power and larger scale distributed generation. To implement the revised business model, the Group is refocusing the size and scope of the business to maintain the necessary core technology, system integration and pilot-scale cell manufacturing capability, but it will no longer maintain the capability to design, develop and sell complete m-CHP products.

During the last 12 months, the Group has made substantial improvements in performance, durability and manufacturing quality of the core fuel cell technology and addressed the technical issues that arose in the 2011 in-home m-CHP field trials. The core fuel cell technology has been independently assessed by an internationally-renowned solid oxide fuel cell ('SOFC') expert. This step-change in the capability of the fuel cell and FCM technology platform gives the Board confidence regarding the application of Ceres' technology across a broad range of market and product applications, including residential m-CHP.

The Board believes that focusing the Group's resources on the development and commercialisation of the Ceres core fuel cell and FCM technology platform is the best way for the Group to achieve value for shareholders.

Proposed Firm Placing and Placing and Open Offer

In order to finance the implementation of this new strategy and the continued development and commercialisation of the technology, the Board is proposing to raise £3.30 million (before expenses) through the issue of 265,000,000 New Ordinary Shares through a Firm Placing and 65,000,000 New Ordinary Shares through a Placing and Open Offer, all at 1 pence per New Ordinary Share, which represents a discount of 49 per cent to the closing price of 1.975 pence on 28 November 2012. Together with the existing cash resources in the business and the anticipated receipt of a UK Government R&D tax credit, this will provide funding for not less than 12 months' operations.

The proposed raise of £3.30 million is being led by IP Group plc ('IP Group') and ORA Capital PartnersLimited ("ORA"). Upon Admission, IP Group through its wholly owned subsidiary IP2IPO Limited will hold between 25.83% and 29.95% of the Enlarged Issued Share Capital (depending on take up by Qualifying Shareholders of Open Offer Entitlements), and ORA through its subsidiary ORA (Guernsey) Limited together with parties deemed to be acting in concert with ORA will hold between 25.83% and 29.95% of the Enlarged Issued Share Capital (depending on take up by Qualifying Shareholders of Open Offer Entitlements). The Board believes that the Group will benefit from IP Group and ORA's access to growth capital and their experience in helping grow, develop and commercialise new technologies such as Ceres' core cell and FCM technology platform.

In the event that Shareholders do not approve the proposed Fundraise, the Board of Directors will have no choice but to immediately implement an orderly wind down of the Group's operations.

Board Changes

Brian Count will step down as Non-Executive Chairman and as a Non-Executive Director, David Pummell will step down as Chief Executive Officer and as an Executive Director and John Nicholas will step down as a Non-Executive Director, in each case with effect from Admission.  Mike Lloyd has agreed to continue in office as a Non-Executive Director following Admission.  In addition, Rex Vevers and Phil Whalen have agreed to remain as Executive Directors following Admission to assist in the management of the Group going forward until new Executive Directors are appointed to the Board.

The Board has resolved to appoint Alan Aubrey as Non-Executive Chairman and each of Steve Callaghan, Michael Bretherton and Robert Trezona as Non-Executive Directors with effect from, and conditional on Admission. Steve Callaghan, a turnaround specialist, will work with Alan Aubrey and the Executive Directors whilst the Board recruits a permanent Chief Executive Officer.

Alan Aubrey, and Robert Trezona are appointees of IP2IPO Limited and Michael Bretherton is an appointee of ORA (Guernsey) Limited. 

Capital Reorganisation

In order to effect the Fundraise, the Company proposes to implement the Capital Reorganisation. This will involve each Existing Ordinary Share being subdivided into and redesignated as 1 New Ordinary Share of 1 pence and 1 Deferred Share of 4 pence. The New Ordinary Shares will have the same rights and benefits as the Existing Ordinary Shares. The Deferred Shares will not be listed, will be effectively valueless and it is intended that all the Deferred Shares will be surrendered for no value and/or cancelled in due course. 

General Meeting

For the purposes of effecting the Fundraise, the Resolutions will be proposed at the General Meeting to be held at Macfarlanes LLP, 20 Cursitor Street, London EC4A 1LT at 11.00 a.m. on 17 December 2012. The following is a summary of the Resolutions which will be proposed at the General Meeting:

·        Resolution 1 (to be proposed as a special resolution): to sub-divide each Existing Ordinary Share into 1 New Ordinary Share and 1 Deferred Share, and to adopt amended Articles of Association to reflect the creation of, and to set out the rights in relation to, the Deferred Shares;

·        Resolution 2 (to be proposed as an ordinary resolution): to authorise the Directors under section 551 of the Act to allot shares up to an aggregate nominal amount of £3,300,000 for the purposes of the Fundraise. If passed, this authority will expire on 17 March 2014; and

·        Resolution 3 (to be proposed as a special resolution): to disapply the pre-emption rights provisions of sections 570 and 573 of the Act in respect of the allotment of equity securities pursuant to the Fundraise. If passed, this authority will expire on 17 March 2014.

A circular will be sent to Shareholders which sets out further detail on the proposed Firm Placing and Placing and Open Offer and will contain the notice convening the General Meeting for the purpose of considering the Resolutions.

The Group is dependent on the completion of the Fundraise so that it can continue to meet its planned expenditure to further develop the Group's core technology. In the event that the Resolutions are not passed at the General Meeting and the Fundraise is not completed, the Board will immediately wind down the Group's operations culminating in the liquidation of each company in the Group.  The amount that Shareholders could receive in respect of their current shareholdings in the event of wind down and liquidation is uncertain but Shareholders should be aware that depending on certain aspects of such a process they could receive little or no value for their current shareholdings. Shareholders should be aware that the Board has commenced the process of reducing the Group's operations, being the first stage in the process of preparing the Group's business for a potential orderly wind down.   

Brian Count, Chairman of Ceres commented:

"Ceres has made substantial technical progress in the last 12 months, particularly in durability and reliability. As a result of the recent successful test results, the Board believes that the alternative strategy of focusing on developing the low cost, compact fuel cell module technology platform, and leveraging the expertise and access to capital of IP Group plc, should enable the commercial potential of the Group's technology to be exploited across a broad range of product applications, customers and territories."

For further information please contact:

Ceres Power Holdings plc David Pummell, CEO / Rex Vevers, Finance Director	Tel. [phone]
Investec Bank plc (Nominated Adviser and Broker) Chris Sim / James Ireland	Tel. [phone]

Notes to editors:

Ceres Power is a leading developer of clean, efficient, cost‐effective fuel cell technology for use in decentralised energy products that reduce operating costs, lower CO2 emissions and improve energy security. These products use the Company's mass manufacturable technology platform, the Fuel Cell Module, based on the Company's unique patented intermediate temperature solid oxide fuel cell technology and operating on mains natural gas or in the future a range of other fuels including packaged fuels, such as LPG. The Company is listed on the AIM market of the London Stock Exchange, and has facilities in Horsham and Crawley, UK, including a pilot-scale fuel cell manufacturing facility.

Important notice:

This announcement does not constitute or form part of any offer or invitation to sell or issue, or any solicitation of any offer to purchase or subscribe for, any New Ordinary Shares, nor shall it (or any part of it), or the fact of its distribution, form the basis of, or be relied on in connection with or act as any inducement to enter into, any contract or commitment whatsoever with respect to the proposed Firm Placing and Placing and Open Offer or otherwise. This announcement is not a prospectus and investors should not subscribe for or purchase any New Ordinary Shares referred to in this announcement. Any offer to acquire New Ordinary Shares referred to in this announcement will be made, and any investor should make his investment, solely on the basis of information in the Circular expected to be published and made generally available in the United Kingdom today. When made generally available, copies of the Circular may be obtained at no cost through the Company's corporate website (http://www.cerespower.com).

The distribution of this announcement and/or the transfer of the New Ordinary Shares in or into jurisdictions other than the United Kingdom may be restricted by law and therefore persons into whose possession this announcement comes should inform themselves about and observe such restrictions. Any failure to comply with such restrictions may constitute a violation of the securities laws of any such jurisdiction. In particular, this announcement should not be distributed, forwarded to, or transmitted in or into the United States, Australia, Canada, Japan, the Republic of South Africa or New Zealand.

The New Ordinary Shares referred to in this announcement will not be offered in or into any jurisdiction unless such an offer can be made without contravention of any unfulfilled registration or other legal or regulatory requirements. The New Ordinary Shares have not been and will not be registered under the Securities Act or with any securities regulatory authority of any state or other jurisdiction in the United States and may not be offered or sold in the United States absent registration or an exemption from registration. The New Ordinary Shares have not been approved or disapproved by the US Securities and Exchange Commission, any state securities commission or other regulatory authority, nor have the foregoing authorities passed upon or endorsed the merits of the Firm Placing and Placing and Open Offer or the accuracy or adequacy of the information contained in this announcement or any other document. Any representation to the contrary is unlawful and is a criminal offence in the United States.

Investec Bank plc, which is authorised and regulated in the United Kingdom by the Financial Services Authority, is acting exclusively for the Company and no one else in connection with the Firm Placing and Placing and Open Offer and will not regard any other person (whether or not a recipient of the Circular) as its client in relation to the Firm Placing and Placing and Open Offer and will not be responsible to anyone other than the Company for providing the protections afforded to its clients or for providing advice in connection with the Firm Placing and Placing and Open Offer or any other matter referred to herein.

Cautionary note regarding forward looking statements:

This announcement includes certain ''forward-looking statements'' with respect to the business, strategy and plans of the Company and its current goals and expectations relating to its future financial condition and performance. Statements that are not historical facts, including statements about the Company's or the Directors' and/or management's beliefs and expectations are forward looking statements. Words such as ''believes'', ''anticipates'', ''estimates'', ''expects'', ''intends'', ''aims'', ''potential'', ''will'', ''would'', ''could'', ''considered'', ''likely'', ''estimate'' and variations of these words and similar future or conditional expressions are intended to identify forward-looking statements but are not the exclusive means of identifying such statements. By their nature, forward looking statements involve risk and uncertainty because they relate to events and depend upon circumstances that will occur in the future. A number of important factors could cause actual results or outcomes to differ materially from those expressed in any forward-looking statements. These factors include, but are not limited to, those discussed in the Circular. Neither the Company nor any member of its group undertake any obligation publicly to update or revise any of the forward-looking statements, whether as a result of new information, future events or otherwise, save in respect of any requirement under applicable laws, the Prospectus Rules, the Disclosure and Transparency Rules and other applicable regulations.

Ceres Power Holdings plc

REVISED BUSINESS STRATEGY

PROPOSED FIRM PLACING AND PLACING AND OPEN OFFER

CAPITAL REORGANISATION

BOARD CHANGES

AND NOTICE OF GENERAL MEETING

1. Introduction

The Board today announces its intention to pursue an alternative strategy for the Group's business. This alternative strategy will involve the restructuring of the business together with a capital raising of £3.30 million (before expenses). The capital raising is to be implemented by way of the Firm Placing and Placing and Open Offer to fund its planned expenditure, led principally by equity support from IP Group plc and ORA Capital Partners Limited. The revised business strategy will see a resizing of the Group's activities and a focus on the continued development and commercialisation of Ceres' core fuel cell module ('FCM') technology platform.

Pursuant to the Fundraise, the Board is proposing to issue 265,000,000 New Ordinary Shares through the Firm Placing and 65,000,000 New Ordinary Shares through the Placing and Open Offer at 1 pence per New Ordinary Share, which represents a discount of 49 per cent to the closing price of 1.975 on 28 November 2012 (being the latest practicable date prior to the date of this announcement). Subject, inter alia, to the passing of the Resolutions at the General Meeting and Admission, dealings in the New Ordinary Shares on AIM are expected to commence on 18 December 2012.

The Group is dependent on the completion of the Fundraise so that it can continue to meet its planned expenditure to further develop the Group's core technology. In the event that the Resolutions are not passed at the General Meeting and the Fundraise is not completed, the Board will immediately wind down the Group's operations culminating in the liquidation of each company in the Group.  The amount that Shareholders could receive in respect of their current shareholdings in the event of wind down and liquidation is uncertain but Shareholders should be aware that depending on certain aspects of such a process they could receive little or no value for their current shareholdings. Shareholders should be aware that the Board has commenced the process of reducing the Group's operations, being the first stage in the process of preparing the Group's business for a potential orderly wind down.   

2.       Background to and reasons for the Fundraise

2.1   Background

During the last 12 months, following a restructuring and refocusing of the business, Ceres has made substantial progress at both core technology and product levels, and has addressed the technical issues arising from the 2011 in-home micro-Combined Heat and Power ('m-CHP') field trials.

Ceres has demonstrated significantly improved performance, durability and manufacturing quality in the Group's low-cost core fuel cell technology, including:

·              Addressing previous rapid degradation of the core fuel cells, which was caused by anode redox (cyclic oxidation and reduction) and by contaminants entering the Group's test infrastructure;

·              Achieving targeted steady state degradation rates of less than 0.5% per 1000 hours of continuous operation (during more than 3000 hours of operation on reformate in short stacks);

·              Increasing electrical power per cell by more than 40%; and

·              Demonstrating robustness to thermal and redox cycling, reconfirming the technology's ability to withstand on-off cycles and emergency stops that could occur when used under typical operating conditions. In tests, stack power in a fuel cell module reduced by less than 5% after 30 emergency stops (involving complete shut-off of fuel and air under running conditions, at temperature).

An independent assessment of the Group's core fuel cell technology was conducted by Dr Nguyen Minh, a former Chief Scientist at GE Global Research and an internationally-renowned solid oxide fuel cell ('SOFC') expert.  Dr Minh confirmed that Ceres' cells and stacks already show performance and reproducibility suitable for residential m-CHP applications under representative operating conditions with excellent thermal cyclability and the potential for cost leadership. He also stated that further planned development work is likely to deliver levels of degradation meeting or exceeding m-CHP product customer launch requirements by 2016. His report and the Group's related announcement dated 18 September 2012 are available on the Group's website. 

The Group continues to operate a prototype m-CHP unit, which has run for more than six months on mains natural gas with degradation rates in line with those achieved at cell stack level (i.e. less than 0.5% per 1000 hours). The Group, with its partners, has also developed a new feature that allows operation in an Uninterruptible Power Supply ('UPS') mode, avoiding shutdowns of the m-CHP product by seamlessly handling temporary and intermittent failures in the mains electricity grid.

This step-change in technology status over the last 12 months, particularly in durability and reliability, gives the Board confidence regarding the application of Ceres' technology platform across a broad range of product applications, including residential m-CHP.

Following the progress achieved, the Group approached institutional and other investors in October 2012 to raise funds to enable the Group to continue its strategy of developing, testing and trialling m-CHP products and launching the product in the UK and European markets from 2016 onwards. However, in the prevailing financial climate, it did not prove possible to secure sufficient funding to continue with this strategy, which would have required a likely total equity investment of approximately £80 million over the next four years to reach product launch.

2.2        Revised strategy and change in business model

Following the Company's announcement on 4 October 2012 that it had been unsuccessful in securing the required funding for its m-CHP product business going forward, the Board undertook an extensive exercise to explore all possible strategic options to generate value for shareholders, including sale of the business as a going concern, sale of the assets and other alternatives to secure value from the Group's intellectual property portfolio.

As part of this process, the Board investigated a range of alternative business models to exploit the Group's core technology. One of these options was to down-size the current business to focus on completing the development of the Ceres' cell and FCM technology platform, rather than continuing to incur the significant cost of developing, trialling and selling complete m-CHP products.

Under this alternative business model, Ceres would offer its technology (through components including cells, stacks and FCMs) together with technical support to a wide range of Original Equipment Manufacturers ('OEM') allowing them to incorporate Ceres technology into their own products for multiple mass market applications, including m-CHP. The Board expects OEM customers would benefit from a significant reduction in the cost and risk of R&D investment and a shortening of the time to market compared to their in-house development. Ceres would expect to earn revenues from a combination of development licenses, on-going fees for services and royalties on OEM mass market product sales.

Whilst completing the review of the strategic options for the Group's business, the Board was approached by a group of investors including IP Group plc ('IP Group') and ORA Capital Partners Limited ('ORA') offering to invest in the Company to enable the continued development and commercialisation of its core technology. IP Group and Ceres have subsequently worked together to explore the opportunities to exploit Ceres' low-cost, cell and compact FCM technology platform through the development of a lower cost business model and leveraging IP Group's expertise in commercialising new technologies.

The Board has concluded that, in the absence of being able to continue to finance the development and sales of complete m-CHP products, the best way for the Group to achieve value for shareholders is to focus its resources on the development and commercialisation of the Ceres' core cell and FCM technology platform. This will enable Ceres to reduce its on-going cash requirements whilst opening up opportunities to address multiple applications and markets through collaboration with OEM partners. The core cell and FCM technology is considered to be suitable for m-CHP in territories such as Europe, South Korea, Japan and North America, and may also be used as the basis of products such as vehicle auxiliary power, telecoms base station power and larger scale distributed generation. This revised business model seeks to capture significant value from volume sales of high value cell/stack and other components, in addition to the generation of fees ahead of sales of complete mass market products.

2.3   The next 12 months

To implement the revised strategy, the Board is refocusing the size and scope of the Group's activities whilst maintaining the necessary core technology, system integration, test and pilot-scale cell manufacturing capabilities. The Group will no longer maintain the engineering capability required to design, develop and trial complete m-CHP products.

To finance the continued development and testing of the cell and FCM technology platform and commercialisation of the technology, the Group is raising £3.30m (before expenses) through a Firm Placing and Placing and Open Offer which, together with the existing cash resources and the anticipated receipt of a UK Government R&D tax credit, will provide funding for not less than 12 months' operations. The key technology focus during this period will be to implement planned fuel cell technology developments, validate cell performance and manufacturability, and incorporate the new cells into a revised FCM platform design.

In parallel, the Group will seek to secure commercial arrangements with potential new OEM customers expressing interest in using Ceres' cell and FCM technology platform in their products. Preliminary discussions have already started with various parties, and the Group expects to make cell/stack and other components available for initial third party evaluation during the next 12 months. Ceres is also exploring how collaboration could enable m-CHP products incorporating the Group's cell and FCM technology to be developed with OEMs and taken to market through Ceres' existing value-chain partners, including British Gas and Itho-Daalderop. Under this revised business model, Ceres would not sell complete m-CHP products, but would earn licence, service fee and royalty revenues from OEMs incorporating Ceres' cell and FCM technology platform and utilising Ceres' existing prototype wall-mounted m-CHP design to accelerate development.

During the next 12 months, Ceres will continue the development of the core cell and FCM technology platform to enable the Group to demonstrate the capability of its core technology and seek to secure initial new commercial arrangements with OEM customers.  However, the Board believes that it remains unlikely that Ceres will achieve positive operational cash flow in the next 12 months and as such the Board anticipates that further funding will be required in the future to further commercialise the Group's technology.

2.4   IP Group and ORA

Upon Admission, IP Group through its wholly owned subsidiary IP2IPO Limited will hold between 25.83% and 29.95% of the Enlarged Issued Share Capital (depending on take up by Qualifying Shareholders of Open Offer Entitlements) and ORA through its subsidiary ORA (Guernsey) Limited together with parties deemed to be acting in concert with ORA will hold between 25.83% and 29.95% of the Enlarged Issued Share Capital (depending on take up by Qualifying Shareholders of Open Offer Entitlements).

IP Group is a leading UK intellectual property commercialisation company whose business is focused on identifying and developing technology companies based on innovative intellectual property that has originated in some of the UK's leading universities. IP Group provides its portfolio companies with access to capital together with business building expertise, networks, recruitment and business support. IP Group has created a diversified portfolio of over 60 companies and has a strong track record of commercialising new technologies. ORA's principal activity is the development and growth of trading businesses within the technology, financial services and resources (including renewable energy) sectors.

The Board believes that the Group will benefit from IP Group and ORA's access to growth capital and the application of their experience in helping grow, develop and commercialise new technologies such as Ceres' core cell and FCM technology platform.

2.5   Changes to the Board

Brian Count will step down as Non-Executive Chairman and as a Non-Executive Director, David Pummell will step down as Chief Executive Officer and as an Executive Director and John Nicholas will step down as a Non-Executive Director, in each case with effect from Admission.  Mike Lloyd has agreed to continue in office as a Non-Executive Director following Admission.  In addition, Rex Vevers and Phil Whalen have agreed to remain as Executive Directors following Admission to assist in the management of the Group going forward until new Executive Directors are appointed to the Board.

The Board has resolved to appoint Alan Aubrey as Non-Executive Chairman and each of Steve Callaghan, Michael Bretherton and Robert Trezona as Non-Executive Directors with effect from, and conditional on, Admission. Steve Callaghan a turn-around specialist, will work with Alan Aubrey and the Executive Directors whilst the Board recruits a permanent Chief Executive Officer. Alan Aubrey and Robert Trezona are appointees of IP2IPO Limited and Michael Bretherton is an appointee of ORA (Guernsey) Limited. 

Robert Trezona holds 6,898 Existing Ordinary Shares as at the date of this announcement.  Michael Bretherton has agreed to subscribe for 2,000,000 New Ordinary Shares in the Firm Placing.

Details of the current and previous directorships of each of Steve Callaghan, Alan Aubrey, Michael Bretherton and Robert Trezona are set out in the appendix to this announcement.

Save for the information above, there are no further disclosures to be made in accordance with Rule 17, Schedule Two (g) of the AIM Rules for Companies.

In the event that the Resolutions are not passed and the Fundraise is not completed, the existing Board of Directors will immediately implement an orderly wind down of the Group's operations.  The amount that Shareholders could receive in respect of their current shareholdings in the event of a wind down is uncertain but Shareholders should be aware that depending on certain aspects of such a process they could receive little or no value for their current shareholdings.   

2.6   Admission to trading on AIM

It is the current intention of the proposed new Board to maintain the Company's admission to trading on AIM.

3.     Key elements of the proposals

3.1  Firm Placing

The Firm Placees have committed to subscribe for 265,000,000 Firm Placing Shares at the Issue Price, conditional on (among other things) Admission. The Firm Placing Shares are not subject to clawback and are not part of the Placing and Open Offer.  

IP2IPO Limited and ORA (Guernsey) Limited have each agreed to subscribe for a large proportion of the Firm Placing Shares and Open Offer Shares as follows:

·        IP2IPO Limited has agreed to subscribe for 107,500,000 Firm Placing Shares at the Issue Price and a maximum of 17,156,591 Open Offer Shares at the Issue Price, subject to clawback in respect of valid applications by Qualifying Shareholders under the Open Offer; and

·        ORA (Guernsey) Limited has agreed to subscribe for 105,500,000 Firm Placing Shares at the Issue Price and a maximum of 17,156,591 Open Offer Shares at the Issue Price, subject to clawback in respect of valid applications by Qualifying Shareholders under the Open Offer.

The 124,656,591 New Ordinary Shares to be issued to IP2IPO Limited (assuming the maximum number of New Ordinary Shares available for subscription by IP2IPO Limited under the Placing is subscribed for) will represent 29.95 per cent of the Enlarged Issued Share Capital. The 122,656,591 New Ordinary Shares to be issued to ORA (Guernsey) Limited (assuming the maximum number of New Ordinary Shares available for subscription by ORA (Guernsey) Limited under the Placing is subscribed for) will represent 29.47 per cent of the Enlarged Issued Share Capital. Together with the 2,000,000 New Ordinary Shares to be issued to Michael Bretherton, who is considered to be a concert party of ORA (Guernsey) Limited, the total holding of both ORA (Guernsey) Limited and Michael Bretherton (assuming the maximum number of New Ordinary Shares available for subscription by ORA (Guernsey) Limited under the Placing is subscribed for) will represent 29.95% per cent. the Enlarged Issued Share Capital.

Sarasin & Partners LLP has agreed to subscribe for 10,000,000 Firm Placing Shares at the Issue Price and a maximum of 14,943,321 Open Offer Shares at the Issue Price, subject to clawback in respect of valid applications by Qualifying Shareholders under the Open Offer.  As a Qualifying Shareholder, Sarasin & Partners LLP is also entitled to subscribe for 3,243,497 Open Offer Shares at the Issue Price. It has irrevocably committed to subscribe for such number of Open Offer Shares and has irrevocably undertaken not to apply for additional Open Offer Shares under the Excess Application Facility. The 32,488,976 New Ordinary Shares to be issued to Sarasin & Partners LLP (assuming the maximum number of New Ordinary Shares available for subscription by Sarasin & Partners LLP under the Placing is subscribed for) will represent 7.81 per cent. of the Enlarged Issued Share Capital.  Sarasin & Partners LLP has also irrevocably undertaken to vote its 4,302,158 Existing Ordinary Shares representing 4.99 per cent of the Existing Ordinary Shares in favour of the Resolutions.

Each of the Firm Placees (other than Sarasin & Partners LLP who is an existing shareholder) has agreed, subject to customary exceptions, that it will not dispose of any New Ordinary Shares acquired pursuant to the Fundraise for a period of 12 months after Admission without the prior written consent of the Company and Investec.

The Firm Placing will be conditional, amongst other things, on the approval of the Resolutions by the Shareholders at the General Meeting and upon the Firm Placing and Placing and Open Offer Agreement becoming unconditional in all respects and Admission of the Open Offer Shares becoming effective by not later than 8.00 a.m. on 24 December 2012 (or such later time and/or date as the Company and Investec may determine, not being later than 8.00 a.m. on 31 December 2012).  

3.2  Placing and Open Offer

Investec, as agent for the Company, has entered into arrangements in connection with the conditional placing of the Open Offer Shares (other than the Sarasin Committed Shares) at the Issue Price, subject to clawback in respect of valid applications by Qualifying Shareholders under the Open Offer.

In order to provide Shareholders with an opportunity to participate in the Fundraise, the Company is providing all Qualifying Shareholders with the opportunity to subscribe at the Issue Price for an aggregate of 65,000,000 Open Offer Shares on the following basis:

49 Open Offer Shares for every 65 Existing Ordinary Shares

Qualifying Shareholders are also being offered the opportunity to apply for additional Open Offer Shares in excess of their pro rata entitlements to the extent that other Qualifying Shareholders do not take up their entitlements in full. In the event that applications are received for in excess of 65,000,000 Open Offer Shares, excess applications will be scaled back pro rata to Qualifying Shareholders' existing shareholdings. 

The proceeds of the Open Offer will amount to £0.65 million (before expenses).

The Board considered whether it would be practicable to structure the Open Offer as a rights issue or other fully pre-emptive offer, but this was not considered feasible in view of the timing constraints and cost implications.

Shareholders should note that the Open Offer is not a rights issue. Qualifying Shareholders should be aware that in the Open Offer, unlike in a rights issue, any Open Offer Shares not applied for will not be sold in the market on behalf of or placed for the benefit of Qualifying Shareholders who do not apply for Open Offer Shares under the Open Offer.

Application has been made for the Open Offer Entitlements and Excess CREST Open Offer Entitlements to be admitted to CREST. It is expected that the Open Offer Entitlements and Excess CREST Open Offer Entitlements will be admitted to CREST on 3 December 2012. The Open Offer Entitlements and Excess CREST Open Offer Entitlements will also be enabled for settlement in CREST on 3 December 2012.  Applications through the CREST system may only be made by the Qualifying Shareholder originally entitled or by a person entitled by virtue of a bona fide market claim.

The latest time and date for acceptance and payment in full under the Open Offer will be 11.00 a.m. on 14 December2012, unless otherwise announced by the Company via a Regulatory Information Service.

Qualifying Non-CREST Shareholders should note that their Application Form is not a negotiable document and cannot be traded.

The Open Offer will be conditional, amongst other things, on the approval of the Resolutions by the Shareholders at the General Meeting and upon the Firm Placing and Placing and Open Offer Agreement becoming unconditional in all respects and Admission of the Open Offer Shares becoming effective by not later than 8.00 a.m. on 24 December 2012 (or such later time and/or date as the Company and Investec may determine, not being later than 8.00 a.m. on 31 December 2012).

If Admission does not take place on or before 8.00 a.m. on 24 December 2012 (or such later time and/or date as the Company and Investec may determine, not being later than 8.00 a.m. on 31 December 2012), the Open Offer will lapse, any Open Offer Entitlements and Excess CREST Open Offer Entitlements admitted to CREST will thereafter be disabled and application monies under the Open Offer will be refunded to the applicants, by cheque (at the applicant's risk) in the case of Qualifying Non-CREST Shareholders and by way of a CREST payment in the case of Qualifying CREST Shareholders, without interest as soon as practicable thereafter.

Application will be made to the London Stock Exchange for the Open Offer Shares to be admitted to trading on AIM. It is expected that Admission will become effective and that dealings will commence at 8.00 a.m. on 18 December 2012.

Further information on the Open Offer and the terms and conditions on which it is made, including the procedure for application and payment, will be set out in the Circular and, where relevant, on the applicable Application Form.

3.3  Capital Reorganisation

The Board proposes to issue the Firm Placing Shares and the Open Offer Shares at the Issue Price, which represents a discount of 49 per cent to the closing price of 1.975 on 28 November 2012 (being the latest practicable date prior to the date of this announcement). Under the Act, a company may not issue shares at less than their nominal value, which, in the case of the Existing Ordinary Shares, is 5 pence. Accordingly, in order to effect the Fundraise, the Company proposes to implement the Capital Reorganisation. Save for the dilution which will result from the issue of the Firm Placing Shares, the interests of Shareholders (both in terms of their economic interest and voting rights) (assuming they take up their Open Offer Entitlement in full) will not be diluted by the implementation of the Capital Reorganisation.

At present, there are 86,215,662 Existing Ordinary Shares in issue. In order to implement the Capital Reorganisation a resolution will be proposed at the General Meeting, to take effect from 6.00 p.m. on 17 December 2012 (or such other date as the Board may determine), whereby each Existing Ordinary Share on the register of members of the Company at 6.00 p.m. on 17 December 2012 (or such other date as the Board may determine) will be subdivided into and redesignated as:

(i)     1 New Ordinary Share of 1p; and

(ii)    1 Deferred Share of 4p.

The New Ordinary Shares will have the same rights and benefits as the Existing Ordinary Shares. The number of New Ordinary Shares in issue following the Capital Reorganisation will be unchanged from the number of Existing Ordinary Shares in issue immediately prior to the Capital Reorganisation.

The Deferred Shares, which will not be listed, will be effectively valueless, non-transferable, carry no voting rights and have no effect on the economic interest of the Shareholders. No share certificates will be issued for the Deferred Shares. Instead it is intended that all the Deferred Shares will be surrendered to the Company for no value and/or cancelled in due course.

Application will be made for the New Ordinary Shares to be admitted to trading on AIM. Dealings in the Existing Ordinary Shares will cease at the close of business on the date of the General Meeting and dealings in the New Ordinary Shares are expected to commence on 18 December 2012. The ISIN and SEDOL number for the New Ordinary Shares will be the same as the Existing Ordinary Shares and any share certificates for the Existing Ordinary Shares will remain valid for the New Ordinary Shares.

Following the Capital Reorganisation, the Company will have in issue, and Shareholders' individual holdings will be for, the same number of New Ordinary Shares as the number of Existing Ordinary Shares immediately prior to the General Meeting.

3.4 Use of proceeds

The purpose of the Fundraise is to provide the Group with sufficient funds to continue its operations for a further 12 months. During this period, the Group will continue the development and testing of the core cell and FCM technology.  The Company anticipates that further funding will be required to further commercialise its technology.

5. Effect of the Fundraise

Upon completion of the Fundraise, the Firm Placing Shares and the Open Offer Shares will in aggregate represent approximately 79.29 per cent. of the Enlarged Issued Share Capital and the Existing Ordinary Shares (which will be re-designated as New Ordinary Shares pursuant to the Capital Reorganisation) will represent approximately 20.71 per cent. of the Enlarged Issued Share Capital.

6. General Meeting

For the purposes of effecting the Fundraise, the Resolutions will be proposed at the General Meeting. The Circular to be posted shortly after the date of this announcement will contain the Notice convening the General Meeting to be held at Macfarlanes LLP, 20 Cursitor Street, London EC4A 1LT at 11.00 a.m. on 17 December 2012.

7. The importance of the Shareholder vote in relation to the Resolutions

The Group is dependent on the completion of the Fundraise so that it can continue to meet its planned expenditure to further develop the Group's core technology.  In the event that the Resolutions are not passed at the General Meeting and the Fundraise is not completed, the Board will immediately wind down the Group's operations culminating in the liquidation of each company in the Group.  The amount that Shareholders could receive in respect of their current shareholdings in the event of a wind down and liquidation is uncertain but Shareholders should be aware that depending on certain aspects of such a process they could receive little or no value for their current shareholdings. Shareholders should be aware that the Board has commenced the process of reducing the Group's operations, being the first stage in the process of preparing the Group's business for a potential orderly wind down. For these reasons, the Directors believe that the Fundraise is in the Shareholders' best interests and that it is very important that Shareholders vote in favour of the Resolutions so that the Fundraise can proceed.

8. Recommendation

The Directors consider the Fundraise and the passing of the Resolutions to be in the best interests of the Shareholders and the Company as a whole. Accordingly, the Directors recommend that Shareholders vote in favour of the Resolutions as they intend to do in respect of their beneficial holdings of an aggregate of 553,691 Existing Ordinary Shares, representing approximately 0.64 per cent of the Existing Ordinary Shares. If the Resolutions are not passed, the Board will immediately wind down the Group's operations as the Group would have insufficient funds to continue trading.

Expected Timetable of Principal Events

Event	Time and/or Date
Record Date for entitlement under the Open Offer	28 November 2012
Announcement of the Firm Placing and Placing and Open Offer Publication of Circular and Application Form	29 November 2012 30 November 2012
Ex-entitlement date of the Open Offer	30 November 2012
Open Offer Entitlements and Excess CREST Open Offer Entitlements credited to stock accounts of Qualifying CREST Shareholders in CREST	As soon as possible after 8.00 a.m. 3 December 2012
Recommended latest time for requesting withdrawal of Open Offer Entitlements from CREST	4.30 p.m. 7 December 2012
Latest time and date for depositing Open Offer Entitlements into CREST	3.00 p.m. 10 December 2012
Latest time and date for splitting Application Forms (to satisfy bona fide market claims only)	3.00 p.m. 11 December 2012
Latest time and date for receipt of completed Application Forms and payment in full under the Open Offer and settlement of relevant CREST instructions (as appropriate)	11.00 a.m. 14 December 2012
Latest time and date for receipt of General Meeting Forms of Proxy	11.00 a.m. 15 December 2012
General Meeting	11.00 a.m. 17 December 2012
Admission and commencement of dealings in New Ordinary Shares	8.00 a.m. 18 December 2012
Firm Placing Shares and Open Offer Shares in uncertificated form expected to be credited to accounts in CREST	As soon as possible after 8.00 a.m. By 18 December 2012
Despatch of definitive share certificates for Firm Placing Shares and Open Offer Shares in certificated form	By 24 December 2012

Reference to times in this announcement are to London time unless otherwise stated.

The times and dates set out in the Expected Timetable of Principal Events above and mentioned throughout this announcement may be adjusted by Ceres Power Holdings plc in which event details of the new times and dates will be notified to the London Stock Exchange and, where appropriate, Qualifying Shareholders.

Different deadlines and procedures for return of forms may apply in certain cases (see the Circular for further details).

Definitions

The following definitions apply throughout this announcement unless the context requires otherwise:

 "Act"                                               the Companies Act 2006

 "Admission"                                     the admission of the Firm Placing Shares and the Open Offer Shares (as the case may be) to trading on AIM becoming effective in accordance with the AIM Rules

"AIM"                                                the market of that name operated by the London Stock Exchange

"AIM Rules"                                      the provisions of the London Stock Exchange entitled "AIM Rules for Companies" as amended or reissued from time to time governing, amongst other things, admission to AIM and the continuing obligations of AIM companies

 "Application Form"                            the personalised application form on which Qualifying Non-CREST Shareholders may apply for Open Offer Shares under the Open Offer

"Board"                                             the board of directors of the Company as at the date of this announcement

"Capital Reorganisation"                     the subdivision of each of the Existing Ordinary Shares into one New Ordinary Share and one Deferred Share

"Circular"                                          the circular to be sent to Shareholders in connection with the Fundraise

"Company" or "Ceres"                        Ceres Power Holdings plc

"CREST"                                           the relevant system (as defined in the CREST Regulations) for the paperless settlement of share transfers and the holding of shares in uncertificated form in respect of which Euroclear is the operator (as defined in the CREST Regulations)

"CREST Manual"                               the rules governing the operation of CREST consisting of the CREST Reference Manual, the CREST International Manual, the CREST Central Counterpart Service Manual, the CREST Rules, the CCSS Operations Manual, the Daily Timetable, the CREST Application Procedures and the CREST Glossary of Terms (as updated in November 2001)

"CREST payment"                             shall have the meaning given in the CREST Manual issued by Euroclear

"CREST Regulations" or                     the Uncertificated Securities Regulations 2001 (S.I. 2001/3755),

"Regulations"                                    as amended from time to time

"Deferred Shares"                              deferred shares of 4 pence each in the capital of the Company

"Directors"                                        the Directors of the Company as at the date of this announcement

"Disclosure and Transparency Rules" the disclosure and transparency rules of the FSA

"Enlarged Issued Share Capital"          the New Ordinary Shares which will result from the sub-division of the Existing Ordinary Shares and the 330,000,000 New Ordinary Shares to be issued pursuant to the Firm Placing and Placing and Open Offer

"Euroclear"                                        Euroclear UK & Ireland Limited, the operator of CREST

"Excess Application Facility"              the arrangement pursuant to which Qualifying Shareholders may apply for any number of Open Offer Shares in excess of their Open Offer Entitlement provided they have agreed to take up their Open Offer Entitlement in full

"Excess CREST Open                       in respect of each Qualifying CREST Shareholder, the

Offer Entitlement"                              entitlement (in addition to his Open Offer Entitlement) to apply for Open Offer Shares pursuant to the Excess Application Facility, which is conditional on him taking up his Open Offer Entitlement in full

"Existing Ordinary Shares"                 the ordinary shares of 5p each in the capital of the Company in issue as at the date of this document

"Firm Placing Shares"                        the 265,000,000 New Ordinary Shares which are the subject of the Firm Placing

"Firm Placees"                                  the persons with whom Firm Placing Shares are to be placed

"Firm Placing"                                   the conditional placing of the Firm Placing Shares

"Firm Placing and Placing and            the conditional firm placing and placing and open offer

Open Offer Agreement"                      agreement dated 29 November 2012 between the Company and Investec, relating to the Firm Placing and Placing and Open Offer, details of which are set out in the Circular

"FSA"                                               the Financial Services Authority

"FSMA"                                            Financial Services and Markets Act 2000 (as amended)

"Fundraise"                                       the Firm Placing and the Placing and Open Offer

"General Meeting" or "GM"                  the general meeting of the Company convened for 11.00 a.m. on 17 December 2012, notice of which is set out in the Circular, and any adjournment thereof

"Group"                                             the Company and its subsidiaries from time to time

"Investec"                                          Investec Bank plc, nominated adviser and broker to the Company

"Issue Price"                                     1 pence per New Ordinary Share

"London Stock Exchange"                  London Stock Exchange plc

"New Ordinary Shares"                       the new ordinary shares of 1 pence each in the capital of the Company and "New Ordinary Share" means one of them

"Non-Executive Director"                    a non-executive director of the Company

"Notice of General Meeting"                the notice convening the General Meeting to be contained in the Circular

"Open Offer"                            the conditional offer made by the Company to Qualifying Shareholders inviting them to subscribe for the Open Offer Shares on the terms and subject to the conditions set out in the Circular and, in the case of Qualifying Non-CREST Shareholders, in the Application Form

"Open Offer Entitlements"                   an entitlement of a Qualifying Shareholder, pursuant to the Open Offer, to apply for 49 Open Offer Shares for every 65 Existing Ordinary Shares held by the Qualifying Shareholder at the Record Date

"Open Offer Shares"                           the 65,000,000 New Ordinary Shares which are the subject of the Open Offer

"Placing"                                           the conditional placing of Open Offer Shares, subject to clawback in respect of valid applications for Open Offer Shares by Qualifying Shareholders under the Open Offer

"Prospectus Rules"                            the rules made for the purposes of Part V of FSMA in relation to offers of securities to the public and admission of securities to trading on a regulated market

"Qualifying CREST Shareholders"       Qualifying Shareholders whose Existing Ordinary Shares are held in uncertificated form

"Qualifying Non-CREST Qualifying       Shareholders whose Existing Ordinary Shares are held in

Shareholders"                                    certificated form

"Qualifying Shareholders"                   Shareholders whose Existing Ordinary Shares are on the register of members of the Company at the close of business on the Record Date with the exclusion of (subject to exceptions) persons with a registered address or located or resident in the Restricted Jurisdictions

"Record Date"                                   close of business on 28 November 2012

"Regulatory Information Service"          a regulatory information service that is approved by the FSA and that is on the list of regulatory information service providers maintained by the FSA

"Resolutions"                                    the resolutions to be proposed at the General Meeting as set out in the Notice of General Meeting

"Restricted Jurisdiction"                     each and any of Australia, Canada, Japan, the Republic of South Africa, New Zealand and the United States

"Sarasin Committed Shares"              the 3,243,497 Open Offer Shares which Sarasin & Partners LLP has irrevocably committed to subscribe for (being its basic Open Offer Entitlement)

"Securities Act"                                 the US Securities Act of 1933, as amended

"Shareholders"                                  holders of Existing Ordinary Shares

"UK" or "United Kingdom"                   the United Kingdom of Great Britain and Northern Ireland

"US", "USA" or "United States"            the United States of America, each state thereof (including the district of Columbia), its territories, possessions and all areas subject to its jurisdiction

APPENDIX

Director	Current Directorships/Partnerships	Previous Directorships/Partnerships
Alan John Aubrey	Oxford Nanopore Technologies Limited	Energetix (Europe) Limited
	IP Ventures (Scotland) Limited	Modern Water plc
	IP2IPO Management IV Limited	Oxford Advanced Surfaces Group plc
	IP Venture Fund (GP) Limited	Oxford Energy Technologies Limited
	IP2IPO Management II Limited	Pimco 2501 Limited
	IP2IPO Management Limited	Modern Biosciences plc
	TTV IV G.P. Limited	Aquarius Equity Holdings Limited
	IP2IPO Limited	Aquarius Northern Entrepreneurs Managing Member Limited
	Top Technology Ventures Limited	Aquarius Equity Partners Limited
	IP Industry Partners Limited	Nuage Services Limited
	Avacta Group plc	Evocutis plc
	Proactis Holdings plc	Syntopix Limited
	LIFEUK (IP2IPO) Limited	Avacta Limited
	Techtran Corporate Finance Limited	Energetix Group plc
	Inhoco 2835 Limited
	Axiomlab Group Limited
	Techtran Limited
	Techtran Services Limited
	Techtran Investments Limited
	Techtran Group Limited
	Axiomlab Investments Limited
	IP Group plc
	Axiomlab
	Proactis Group Limited
	IP2IPO Services Limited
	Tissue Regenix Group plc
	IP2IPO (Europe) Limited
	IP2IPO Management V Limited
	IP2IPO Guarantee Limited
	North East Technology (GP) Limited
	IP2IPO Management VI Limited
	BIZ 2 BIZZ Investments Limited
	Scissor Search Limited
	Axiomlab Investment Management
	Hatt III General Partner Limited
	Inhoco 2895 Limited
	K4BD Limited
	Eureka! The National Children's Museum
Michael Anthony Bretherton	ORA Capital Partners Limited	Novum Securities Limited
	ORA Capital Services Limited	Novum Private Clients Limited
	ORA Guernsey Limited	Novum Nominees Limited
	Abway Enterprises Corp	Nanoco Tech Limited
	Antisoma plc
	Foram Properties Limited
	Nanoco Group Plc
	Obtala Limited
	Obtala Services Limited
	Obtala Resources Limited
	Oxford Advanced Surfaces Group Plc
	Oxford Pharmascience Limited
	Oxford Pharmascience Group Plc
	Oxford Nutra Limited
	Oxray Limited
	Tissue Regenix Group Plc
Steve Callaghan	Steve Callaghan Services Limited	Torex Retail Holdings Limited
	Navtech Radar Limited	Anker Systems Limited
		Torex Canada Limited
		Torex Retail Anker GmbH (incorporated in Austria)
		Torex Retail Anker GmbH (incorporated in Switzerland)
		Torex Retail NV
		Torex Retail A/S
		Torex Retail OY
		Torex Retail Solutions GmbH
		Torex Retail BV
		Torex Retail Solutions BV
		Torex Retail AB
		Torex US, Inc
		MMI Research Limited
Robert Trezona		Future Blends Limited
		Eight19 Limited
		Leylands Management Company Limited

 

END

 

 

MSCPGGBAGUPPGWB